US INTEREST rates will stay close to zero for “an extended period” despite signs that the economy is stabilising, US Federal Reserve chairman Ben Bernanke has told a congressional committee.

“The pace of decline appears to have slowed significantly, and final demand and production have shown tentative signs of stabilisation,” Mr Bernanke told the House financial services committee. “The labour market, however, has continued to weaken. Consumer price inflation, which fell to low levels late last year, remained subdued in the first six months of 2009.”

The Fed chairman said financial conditions remained stressed, and many households and businesses were still finding it hard to obtain credit. “Job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending,” he said.

Mr Bernanke said the US central bank had the necessary tools to reverse the economic stimulus it helped to produce once conditions improve. But he warned that the economy was still too weak to consider raising interest rates.

“Monetary policy remains focused on fostering economic recovery,” he said. “However, we also believe that it is important to assure the public and the markets that the extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed, thereby avoiding the risk that policy stimulus could lead to a future rise in inflation.”

Mr Bernanke’s testimony came as a USA Today/Gallup poll found that 49 per cent of Americans disapprove of the way US president Barack Obama is dealing with the economy, compared to 47 per cent who approve. A second poll found that the proportion of Americans who think the $787 billion (554 billion) federal stimulus package will have a positive impact has fallen from 56 per cent to 45 per cent.